Good morning New York,
ALPHAVILLE
Thundering metaphors: Michael Hartnett and team at BofAML have passed on commentary and metaphors aplenty.
GDP and GDI, two sides of the same inevitably-flawed coin: A couple of years ago, we did a long Q&A with Fed staff economist Jeremy Nalewaik about his work on the differences between Gross Domestic Product and Gross Domestic Income. The two indicators, as you would expect given their theoretical sameness, tend to be nearly identical over a long enough stretch of time. GDI is interesting mainly because Nalewaik had found that its early estimates tend to be revised less over time than are initial estimates of GDP. In English, this suggests that GDI is a more accurate early measure. Cardiff's post has much more.
My big fat interbank reference rate: Joseph spotted a bracing proposal in an IMF working paper for the race to choose one rate, among several out there, to replace discredited old Libor… The basic idea seems to be not just to set the new benchmark off actual trades, as with many of the options for replacing Libor's survey of banks, but to do it in crushing numbers. You couldn't fudge it.
NEWS
Delayed Bumi results reveal $2.4bn loss: The results, which were delayed following the suspension of the company's shares, also revealed the company had discovered $200m of spending with "no clear business purpose". (Financial Times)
Japanese deflation eased slightly, and industrial production rose 1.7% in April; the latter exceeding median forecasts of a Bloomberg survey which pointed to an 0.6% gain. Core consumer prices, which include oil but exclude volatile costs for fresh food, fell 0.4% from a year earlier, matching the Reuters median market forecast and coming in below the Bloomberg consensus of 0.7%. The sixth straight fall was slightly narrower than the 0.5% decline in March. Household spending for April missed expectations, coming in at 1.5% growth year-on-year, compared to expectations of 3.1%, and a 5.2% rise in March. (Bloomberg)(Reuters) Apple hiked prices of iPads and iPods in Japan on Friday, becoming the latest and highest-profile brand to join a growing list of foreign firms asking Japanese consumers to pay more as a weakening yen squeezes income. (Reuters)
IMF gives qualified thumbs up to Abenomics (IMF review)
Record joblessness, low inflation show euro zone's pain: Joblessness in the 17-nation currency area rose to 12.2 percent in April, Eurostat said on Friday, marking a new record since the EU's statistics office started collecting data on the countries in 1995. With the euro zone also in its longest ever recession since its creation in 1999, consumer price inflation was far below the ECB's 2 percent target in May, although it ticked up to 1.4 percent from 1.2 percent in April. (Reuters)
India records slowest growth in a decade: India's economy grew at 5 per cent in the financial year to March, the slowest rate in a decade of rapid expansion, the Central Statistics Office said on Friday. In the latest quarter ended on March 31, gross domestic product grew 4.8 per cent year-on-year, in line with economists' forecasts and only slightly above the 4.7 per growth rate recorded in the preceding three months. (Financial Times) Charts from BNP Paribas' Richard Iley:
Consumer products giants turn screws on ad agencies, suppliers: "Some of the world's largest consumer products groups are delaying payments to advertising agencies and commodity producers for up to six months, squeezing cash flows and causing alarm at critical points in their supply chains." Mondelez International, Procter & Gamble, Johnson & Johnson and Anheuser-Busch InBev have all recently extended their payment terms. (Financial Times)
The UK coalition will announce £15bn of extra spending for future major infrastructure projects next month, in a move designed to stimulate the economy and challenge Labour to outline its own plans to revive growth. (Financial Times)
Lloyds sells US mortgage portfolio for £3.3bn: Lloyds Banking Group has further accelerated its strategy of disposals by selling off a book of securities backed by US home loans for £3.3bn. Lloyds, which is 39 per cent owned by the UK taxpayer, said it would book a £540m pre-tax gain from the sale of the US mortgage portfolio, in a move that the bank said would boost its core tier one capital and help trim its pension deficit. (Financial Times)
Sony hires banks for Loeb plan: "Sony is working with Morgan Stanley and Citigroup as it considers adopting billionaire Daniel Loeb's proposal for an initial public offering of its entertainment unit, said people familiar with the matter." (Bloomberg)
Smiths Group is again weighing a potential £2bn-plus sale of its medical division, which played a role in the first successful IVF treatment, three years after a failed private equity approach for the business. People familiar with the talks said the FTSE 100 engineering group was investigating the option of selling the division after an approach by potential buyers including CareFusion, the San Diego-headquartered healthcare group. (Financial Times)
UBS is raising salaries for investment bankers to catch up with rivals, said three people with knowledge of the plan, while it continues with a plan to cut staff numbers by 10,000. (Bloomberg)
Procter & Gamble is already thinking about succession, with four senior executives planned to be elevated to new roles. Former chief exeuctive AG Lafley, who came out of retirement last week to place his hand-picked successor Robert McDonald, isn't expected to stay for more than two or three years and lining up possible replacements is one of of his top priorities, people close to the company said. (Wall Street Journal)
Encore breaks into UK debt market: US debt management and recovery firm Encore Capital Group has agreed to buy a majority stake in Cabot Credit Management (CCM) for £128m, to tap into the UK's debt purchase market. The deal comes weeks after New York buyout house JC Flowers acquired Cabot in an agreement worth an estimated £500m. (Financial Times)
Boeing won the first order for the stretched version of its 787 Dreamliner as Singapore Airlines split a purchase of jets with Airbus SAS valued at $17bn. (Bloomberg)
Markets: Markets are finishing a volatile week and record-breaking month in cautious mood as investor focus remains fixed on the impact and trajectory of central bank support programmes. Across asset classes there is a mild "risk off" trend, with 10-year Treasury yields down 2 basis points to 2.1 per cent, growth-focused currencies such as the Australian dollar easing back, while gold is consolidating above the $1,400 an ounce level, up $4 to $1,417 an ounce. The FTSE All-World equity index is down 0.2 per cent after the Asia-Pacific index excluding Japan fell 0.4 per cent and as the FTSE Eurofirst 300 opens with a drop of 0.2 per cent. US index futures suggest Wall Street's S&P 500, which last week hit a record close of 1,669, will slip 1 point to 1,653 when the starting bell rings later in the day. The Nikkei closed up 1.4 per cent writes the FT's Global Markets cardinal Jamie Chisholm.
